VA Guaranteed Home Loans

VA Guaranteed Home Loans Satellite and Streaming Video Lender Training Why VA? April 16, 2008 Student Materials U S Department of Veterans Affairs – Veterans Benefits Administration Loan Guaranty Service Training Unit - 264B http://www.homeloans.va.gov/broadcast.htm Table of Contents Course Objective/Outline Benefit Summary 7 Easy Steps to a VA-Guaranteed Home Loan Proof of Service Veterans Information Portal Web LGY The Appraisal System (TAS) Determining Eligibility Ordering an Electronic Certificate of Eligibility Loan Amounts VA Funding Fee Schedule Funding Fee Payment System Obtaining a Loan Guaranty Certificate Reference Sheet for Realtors Frequently Asked Questions Regional Loan Centers Contact Available Continuing Education Credits Website Directory 3 4 5 6 10 11 12 14 16 17 18 19 20 21 22 29 30 31 2 Course Objective and Outline Course objective: After viewing this broadcast you will be able to identify Benefits of the VA Guaranteed Loan Program for Veterans, Lenders and Real Estate Professionals. Outline I. Program Overview a. Eligibility b. Fees c. Appraisals II. VA Automated Systems a. b. c. d. Electronic Certificate of Eligibility (COE) Automated Underwriting Systems (AUSs) WebLGY Pay.Gov Questions will be answered throughout live broadcast. 3 Department of Veterans Affairs Home Loan Guaranty Benefits Summary What Is A VA Guaranteed Loan? VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home THAT MUST BE FOR THEIR OWN PERSONAL OCCUPANCY. To get a loan, a veteran must apply to a lender. If the loan is approved, VA will guaranty a portion of it to the lender. This guaranty protects the lender against loss up to the amount of guaranty and allows a veteran to obtain favorable financing terms. The Veterans Benefits Act of 2004 changed the maximum guaranty amount to an amount equal to 25 percent of the Freddie Mac conforming loan limit determined under section 305 (a) (2) of the Federal Home Loan Mortgage Corporation Act for a single family residence, as adjusted for the year involved. To illustrate, the maximum guaranty for 2008 would be $104,250. This is 25 percent of the 2008 Freddie Mac conforming loan limit for a single-family residence of $417,000. Under Freddie Mac’s charter, maximum original loan amounts are 50 percent higher for first mortgages on properties in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. This higher amount would also apply to VA loans in these areas. VA Loans Offer The Following Important Features: x x x x x x x x x x x Equal opportunity for all qualified veterans to obtain a VA loan. No down payment (unless required by the lender or the purchase price is more than the reasonable value of the property). Buyer informed of reasonable value. Negotiable interest rate. Ability to finance the VA funding fee (plus reduced funding fees depending on down payment, and exemptions for veterans receiving compensation). Closing costs are comparable with other financing types (and may be lower). No mortgage insurance premiums. An assumable mortgage. Right to prepay without penalty. For homes inspected by VA during construction, a warranty from the builder and assistance from VA to obtain cooperation of the builder. VA assistance to veteran borrowers in default due to temporary financial difficulty. VA Does Not Do The Following: x Guarantee that the home is free of defects. VA guarantees only the loan. It is the veteran’s responsibility to assure that they are satisfied with the property being purchased. The VA appraisal is not intended to be an “inspection” of the property. A veteran should seek expert advice (a qualified residential inspection service), as necessary, BEFORE legally committing to a purchase agreement. If you have a home built, VA cannot compel the builder to correct construction defects although VA does have authority to suspend a builder from further participation in the home loan program. VA can’t guarantee that a veteran is making a good investment. VA can’t provide a veteran with legal services. 4 x x x . . 7 Steps to a VA Guaranteed Home Loan . 1 2 3 4 5 Apply for a Certificate of Eligibility (CoE) or have your lender apply online using the WebLGY application Decide on a home you. want to buy and sign a purchase. agreement conditioned on approval of your VA home loan. Select a lender, present them with your CoE and complete a loan application. Order an appraisal from VA (this is usually done by the lender). The lender will request VA assign a licensed appraiser to determine the reasonable value for the property. A Notice of Value will be issued. The lender will let you know the decision on the loan. You should be approved if the established value and your credit and income are acceptable. Attend the loan closing. The lender or closing attorney will explain the loan terms and requirements as well as where and how to make the monthly payments. All relevant papers are signed and a move-in is determined. The lender applies to VA for evidence of guaranty.. 6 7 5 PROOF OF SERVICE DD-214 The DD-214 is the most common type of proof of service. It has been issued to veterans discharged from all branches of service since January 1, 1950. What to look for? 9 Veteran’s name while in the service 9 Branch of Service 9 Service Number (SSN used in lieu of service number as of dates shown): o Army & Air Force – 7/1/69 o Navy & Marine Corps – 1/1/72 o Coast Guard – 10/1/74 9 Social Security Number 9 Date of Birth 9 Dates of Service (entry date, discharge date, and net active service) 9 Character of Service* 9 Lost Time NOTE: After October 1, 1979, the form was revised and veterans were issued a “Member1” and a “Member-4” copy of the DD-214. The “Member-4” copy must be submitted with the VA Form 26-1880 as the character of service and time lost are listed on this form. *Any one of the following may be listed in the Character of Service section of the DD-214: Type of Discharge for Active Duty Veteran Honorable (HON) Under Honorable Conditions (UHC) General (GEN) Other Than Honorable (OTH) Bad Conduct Dishonorable Action Acceptable Acceptable Acceptable Requires Adjudication Review Requires Adjudication Review Unacceptable NOTE: The only acceptable character of service for a veteran who served in the Selected Reserves/National Guard is “HONORABLE”. DD-215 - The DD-215 is issued to correct any wrong information on a DD-214. When a veteran submits a DD-215, the DD-214 must also be included. 6 PROOF OF SERVICE Proof of Service Prior to 1950 Prior to 1950, each branch of the service issued its own separate proof of service: Army Navy Air Force Marines WDAGO #53-55 NAVPERS-553 WDAGO #53 NAVMC78 All required eligibility information is included on the above-listed types of separation forms. However, the information may be difficult to locate as the forms do not have a uniform format. Certificate of Military Service The Certificate of Military Service is issued to veterans by the National Personnel Records Center (NPRC) as a substitute for a copy of the actual discharge papers. NPRC issues this record because the original proof of service was lost or destroyed. This is an official document and can be used for verification of military service. It shows the entry date, discharge date and character of service. ACTIVE DUTY Statement of Service A Statement of Service is required as proof of service when a veteran is serving on active duty or when a reservist continues to serve in the Selected Reserves. There is no official format, but it is usually prepared on military letterhead or is computer generated by the branch of service. x An acceptable letter will show the veteran’s name, service/Social Security number, date of birth, any lost time or breaks in service and date of entry into active duty or the Selected Reserves. If the Statement of Service does not reference any lost time, it should be assumed there was none. The character of service is not generally provided on this type of proof of service. When it is not stated, the character of service should be considered “Honorable”. Finally, the letter should be signed by the adjutant, personnel officer or commanding officer of the unit. “Orders” or Leave and Earnings Statements (LES) do not fulfill the same requirements as the statement of service. x x x 7 PROOF OF SERVICE Reservist/National Guard Unlike members of regular components of the Armed Forces, there isn’t one standard form given to members of the Reserves or Guard. Generally, members of the Reserves/Guard will have some type of points summary detailing participation in the Selected Reserves. The following documents are usually acceptable to establish eligibility: Reserve/Guard Branch Army/Air National Guard Army Reserve Navy Reserve Air Force Reserve USMC Reserve Coast Guard Reserve Discharge Certificate The discharge certificate is issued to both regular military and reservist veterans. It can be used as proof of character of service for a reservist when only a points statement is available. Required Proof of Service NGB-22, Report of Separation and Record of Service DARP Form 249-2-E or ARPC Form 606, Chronological Statement of Retired Points NRPC 1070-124, Annual Retirement Point Record AF-526, Point Summary Sheet NAVMC-798 CG-4175 Note: The minimum required length of service for a Reserve/National Guard member is six (6) years of active reserve duty. 8 OBTAINING PROOF OF SERVICE How to Obtain Proof of Service The National Personnel Records Center (NPRC) may be contacted to obtain a copy of military service records. The NPRC has several methods available to request records: 1. eVetRecs (www.archives.gov/veterans/evetrecs) - The request for records may be initiated via the Internet by the veteran. A follow up faxed or mailed application with signature will be required. 2. Standard Form (SF) 180, Request Pertaining to Military Records may be obtained via Internet, postal mail, or telephone: a. Download and print form from http://www.archives.gov/veterans b. Request form by mail: The National Personnel Records Center 8601 Adelphi Road College Park, MD 20740-6001 c. Telephone NPRC at 1-866-272-6272 If records need to be ordered, please start the process early on as this request could take some time to fill. State Departments of Veterans Affairs – If the veteran was discharged after 1979, there is a possibility that the State Department of Veterans Affairs may have a copy of the DD-214. The veteran would need to contact the office located in the state that was listed as their home of record. The ‘home of record’ is where the veteran entered into active duty. The website for the National Association of State Directors of Veterans Affairs is www.nasdva.com. Contact information for each state office may be located there. Department of Veterans Affairs (VA) – If the veteran has made a claim with VA, there is a chance that service information is in our database. It may be possible for the veteran to obtain a letter regarding their service information from the Veterans Service Center. The toll-free number, 1-800-827-1000, will connect the veteran to the nearest VA Regional Office. 9 VETERANS INFORMATION PORTAL REGISTRATION Before you begin, have ready: Œ Œ Œ Lender identification number Social Security Number E-mail address The website is http://vip.vba.va.gov. 1. Click on “Register”. (Located on the left-hand side of the screen.) 2. Next screen will show all of the programs you are registering for. “Click here to register” is located at the bottom of the screen. 3. Input all required information. When the “Lender” box is checked, you will be asked to input your lender ID number and the “Lender PIN”. The PIN is usually comprised of the last four digits of the ten-digit ID number. Click “submit”. 4. The system will generate a user name (first name.last name) and password for you. The password is case sensitive. Write it down exactly as it is shown on the screen. Better yet, print the screen. 5. Get out of the screen and go back into http://vip.vba.va.gov. Enter your user name and password in the “VIP sign in” boxes. 6. When you log on for the first time you will be asked to change your password. The password must be at least eight characters long. The password must consist of a combination of: a. b. c. e. One capital letter One small letter One number or one special character (i.e. !@#, etc.) Cannot be a word found in the dictionary. 7. Do not share passwords! Each user should have their own user name and password. 10 WebLGY On May 22, 2006 changes to the VIP were made with regard to the automated Web Based Loan Summary (WBLS) and Automated Certificate of Eligibility (ACE) functions. ACE is no longer shown as an application and WBLS is no longer accessed through TAS/WBLS. WBLS and eligibility functions are now accessed via a new application link called webLGY. The guaranty and eligibility functions have been enhanced with new features and there is also a Help feature that can be accessed online directly through the site. WebLGY incorporates the functions previously accessed in WBLS, ACE, and Web Guaranteed Insured Loan applications. WebLGY provides the following enhancements to the loan guaranty and eligibility process: • Real-time guarantees • Search by VA loan number • Search by lender loan number • Search by date range – includes all records in the LGY historical database (formerly WEBGIL) • View loan status, loan summary, history, and notification of audit selection • Submit loan analysis for prior approval loans • Print duplicate loan guaranty certificates • Prior loan validation – replaces webGIL LIN search • Pre-populates data previously entered into funding fee payment system & appraisal system • Real-time certificate of eligibility (COE) determinations • Electronic 26-1880 to submit requests for COE when a determination cannot be made online • Upload correspondence with COE application • View the status of COE application • E-mail notification when electronic COE issued • Print COE • Search COE 11 The Appraisal System (TAS) This is a centralized, Internet-based appraiser assignment system designed to increase the efficiency of processing veterans’ loan applications. TAS can be found by accessing the Veterans Information Portal (please refer to page 2 for the Internet address). Federal Law requires all appraisals for VA guaranteed loans to be completed by an appraiser on a rotational basis from a panel of approved fee appraisers. TAS offers benefits to all users including ease of use, speed, accessibility, and expanded lender access to VA records. Most importantly, TAS allows automatic lenders who are authorized under the Lender Appraisal Processing Program (LAPP) to issue Notices of Value (NOVs) directly to VA’s system. With the combination of E-Commerce Appraisals and TAS, LAPP lenders no longer have to send copies of NOVs and appraisals to VA at the time of issuance. Ordering a Case Number x Agents ordering appraisals under LAPP for a LAPP approved sponsor will need the sponsor’s 10-digit lender ID number. x The system is designed to generate a Request for Determination of Value. x Click once on the submit button when you have completed the form and VA Form 26-1805 will appear on the screen. Scroll down to find the name, address and phone number of the appraiser. (Because the hour glass does not always appear, if you click twice on the submit button you will get an error message. Clicking the back button on your browser will get you back to your data entry screen, you will have to resubmit the data in order to obtain a VA Form 26-1805.) x If for any reason you are uncertain of your success in getting an assignment, go under All Users function and search to see if you obtained a case number and appraiser or call Construction and Valuation for assistance at 800-827-0611 ext 5421. The Condominium/Planned Unit (PUD) and Builder (CPB) system The PUD and CPB system was created to assist VA registered lenders and builders as well as veterans in obtaining VA information about Condominiums and PUDS. A password is not required to access this system. The PUD and CPB system can be found through the Veterans Information Portal. 12 E-Appraisal E-Appraisals is the next advancement in VA’s continuing process of improvement in appraisal delivery and customer service. Instead of emailing appraisals to the respective e-mail account for each local RLC and to each lender, under E-Appraisals, fee appraisers will now submit their appraisals to one centralized VA web site. This will enhance VA’s ability to track and monitor all incoming appraisals. Additionally, E-Appraisal will interface with TAS and, upon receipt of an appraisal; TAS will show it as pending review. With E-Appraisals lender SARs can immediately proceed to review the appraisal and issue the Notice of Value. SARs will no longer have to wait to receive an appraisal sent to them by the appraiser or lender agent. 13 Determining Eligibility Lenders should first attempt to obtain a COE through the Certificate of Eligibility function in WebLGY. The system can be accessed through the Veterans Information Portal (please refer to page 2 for Internet address). Lenders input data and receive an eligibility determination within seconds. This is an alternative to mailing or electronically submitting VA Form 26-1880, Request for a Certificate of Eligibility, to the Eligibility Center. New Format Old COE Format The Certificate of Eligibility function in WebLGY can’t make all determinations but is helpful in many cases. If eligibility cannot be established, the lender will get a Refer message saying the determination cannot be made and a reference number. A Refer message only means that eligibility cannot be determined automatically by the lender. It does not necessarily mean the veteran is not eligible. The “traditional” green or yellow Certificates of Eligibility are still valid; however, they aren’t required if you obtain a certificate through the WebLGY. If you are not able to obtain a Certificate of Eligibility via the Certificate of Eligibility function in WebLGY, please send or electronically submit VA Form 26-1880, Request for a Certificate of Eligibility, and evidence of service to the Winston-Salem Eligibility Center. Winston-Salem Eligibility Center Contact Information: Mailing Address VA Loan Eligibility Center PO Box 20729 Winston-Salem, NC 27120 Overnight Address VA Loan Eligibility Center 251 North Main St. Winston-Salem, NC 27155 Phone Number: (888) 244-6711 Evidence of Service Requirements: ™ Veterans Still on Active Duty: Statement of Service signed and dated by their Commanding Officer on official letterhead and include: 14 x x x x x x x Service Member’s Name Date of Birth Social Security Number and/or Service Number Enlistment Date The Fact That They Are Still on Active Duty Contain The Phrase No Time Lost (If Applicable), or List The Time Lost. If They Are In The Reserves or National Guard, Indicate If They Serving Under The Authority of Title 10 or Title 32 ™ Discharged Veterans (Regular Military): Please provide Certificate of Release or Discharge From Active Duty, DD 214, Member Copy 4. To obtain a DD 214 please contact: National Personnel Records Center Military Personnel Records 9700 Page Avenue St. Louis, MO 63132-5100 http://www.archives.gov/ (web site) Veteran borrowers or next of kin can request copies of Military Personnel Records from the National Personnel Records Center online at: http://www.archives.gov/veterans/evetrecs/ 15 ORDERING AN ELECTRONIC COE After logging into the Veterans Information Portal: 1. Choose the WebLGY application. 2. Click on “Eligibility”. 3. From the drop down box, select “Automated Certificate of Eligibility” 4. Input all requested information (name, SSN, date of birth, etc.), then “Submit” At this point, you will either get a message that you can view/print the COE or that the system was unable to process your case online. If the system cannot process the case online, the following steps must be completed: 1. Click on the “Electronic Application” link. 2. Input required information. This information comes directly from the application for the COE, VA Form 26-1880. 3. Supporting documentation such as the DD-214 or HUD-1 Settlement Statement may be scanned and uploaded for submission with the electronic application. 4. Provide your e-mail address so that you can be notified when the application has been processed. Be sure to keep the reference number generated by the application. Using the reference number, you may track the progress of the electronic application. If you choose not to use the electronic application process, the mailing address of the eligibility center is provided on the screen. 16 Loan Amounts VA does not limit the size of the veteran’s loan. VA will guaranty up to 25% of the Freddie Mac Conforming Loan Limit, which is currently $417,000 ($625,000 in Alaska, Hawaii, Guam, and the U.S. Virgin Islands). Therefore, a veteran can obtain a loan of up to $417,000 without any down payment! Additionally, Ginnie Mae recently eliminated its limitations on “jumbo” loans, meaning that veterans and realtors can take advantage of the many benefits of the VA home loan program in even more areas than before. Since the amount of the cash down payment plus the available guaranty must equal at least 25% of the loan amount, the veteran will have to contribute a down payment. However, on a $600,000 loan, the veteran would only have to make an 8% ($45,750) down payment in order to avoid PMI. With a conventional loan, the same veteran would have to pay 20% or $120,000! 17 VA Funding Fee Schedule Funding Fee for Purchase and Construction Loans (including Hybrid ARMS) Effective Date October 1, 2004 Type of Veteran Active Duty (AD) Veterans of (AD) Service Down Payment None 5% - 10% 10% or more 1st Time Use 2.15% 1.50% 1.25% 2.40% 1.75% 1.50% Subsequent Use 3.30%** 1.50% 1.25% 3.30%** 1.75% 1.50% None Reserves/National Guard* 5% - 10% 10% or more *If the person is a reservist called to active duty, AND through that service, they qualify as an active duty person or a veteran of active duty service, the lower % applies. Here’s an example: Joe Smith is currently a reservist and has been in the reserves for 10 years (so he would easily meet the service requirements to qualify for VA Home Loan Benefits as a reservist). His unit is called up in support of Operation Enduring Freedom, and he is sent to Iraq, where he serves for 12 months, the full period that he was called to active duty. Once Joe has been on active duty in Iraq for more than 90 days, he would be eligible for benefits as an active duty serviceman. **The higher subsequent use fee does not apply to these types of loans if the veteran’s only prior use of entitlement was for a manufactured home loan. Funding Fee for Cash-Out Refinancing Loans Type of Veteran Regular Military Reserves/National Guard Percentage for First Time Use 2.15% 2.4% Percentage for Subsequent Use 3.3%* 3.3%* Funding Fee for Other Loan Types Type of Loan IRRRL NADL VA Assumption 1st Time and Subsequent Use 0.50% 1.25% 0.50% 18 VA’s Funding Fee Payment System is an Internet based data input system where the lender enters relevant data regarding the payment of a funding fee. This system will allow the lender to print a receipt within 24 hours of data entry. Access is obtained at https://va.pay.gov The Lender will register as a new user whereby they will give a variety of data regarding their lender identification number, corporate bank account routing number and address. Once registered, the lender will input their lender ID and password to formally get into FFPS. The lender can choose between a variety of functions such as: submit new payment, view previously input data through a variety of search criteria, cancel input, make corrections and view funding fee refunds. If inputting a new funding fee, the system has an automatic calculator to determine the amount owed. If you have input a funding fee payment, you will be able to print a receipt directly from this system within 24 hours. For Funding Fee Payment System problems, please call the new customer service phone number at 800-624-1373 or e-mail them at pay.gov.clev@clev.frb.org. 19 Obtaining the Loan Guaranty Certificate WebLGY WebLGY is a web-based application that will allow lenders to receive their Loan Guaranty Certificates online and can be accessed through the Veterans Information Portal (please refer to page 2 or 4 for the website address). Lenders will be able to enter loan information online and receive a guaranty immediately upon submission. The majority of the data on the Loan Summary form in WebLGY will be pre-populated from the Funding Fee Payment System (FFPS) and TAS. The data required to receive a Loan Guaranty Certificate will be derived from VA Form 26-0286, VA Loan Summary Sheet. WebLGY displays the Loan Summary Sheet and the user is required to complete the fields that are not pre-populated and make sure that all pre-populated data is accurate. If the pre-populated data is incorrect, it will have to be corrected at its source (FFPS or TAS). In order for a guaranty to be processed in WebLGY, a funding fee has to be paid in the pay.gov system. VA requires a two-day turn around time between a payment being processed in pay.gov and the payment receipt being uploaded into WebLGY. Also, a record needs to be established in pay.gov for veterans who are exempt from the funding fee. Once the lender receives a guaranty through WebLGY, they will be required to submit the Certificate of Eligibility to the local Regional Loan Center. WebLGY will display cases required to be submitted for full review. Lenders can obtain duplicate Loan Guaranty Certificates through WebLGY. 20 VA Home Loans Quick Reference Sheet for Realtors Major Benefits of the Program For veterans, the VA Home Loan provides no-down-payment financing backed by the full faith and credit of the Federal Government. For you, the realtor, the VA Home Loan program offers the opportunity to expand your customer base. In nearly all cases, lenders use the same automated underwriting systems for VA loans that they use for conventional loans. That means there’s no waiting for VA approval, so your VA loans close as fast as conventional products! Veterans and lenders have rated their satisfaction with our program at over 90%, and we hope that realtors nationwide will join the many satisfied program participants who do business with VA. America’s Veterans As of September 2006, there were an estimated 23,976,991 veterans in the United States. Here are the top ten states in terms of veteran population: State California Florida Texas New York Pennsylvania Ohio Illinois Michigan Georgia North Carolina Veteran Population 2,203,727 1,747,076 1,652,214 1,094,391 1,088,220 1,012,466 852,409 804,011 757,070 756,216 Those aren’t the only states with large veteran populations—Virginia, Washington, Arizona, New Jersey, Missouri, Indiana, and Tennessee are estimated to each have over half a million veterans within their borders. Veterans obtaining VA loans have a median FICO score of 680, and VA’s delinquency rate dropped 3.1% from second quarter 2006 to second quarter 2007. During that same time period, delinquencies jumped 19.2% for prime loans, 26.7 % for subprime loans, and 1% for FHA loans. Plus, with multiple products available—from 30-year fixed to hybrid adjustable-rate mortgages—there’s sure to be a loan to suit the veterans in your state. 21 Frequently Asked Questions What is the maximum loan amount VA will guarantee? VA does not have a maximum loan amount. It is understood that lenders must generally have at least 25% of the loan guaranteed by VA to sell the loan on the secondary market. Based on this factor the following limits may apply: Loan Types Purchases or Construction * Regular or Cash-Out Refinance * Interest Rate Reduction Refinance Limit $417,000 including VA's Funding Fee (1/1/2008-12/31/2008) $144,000 including VA's Funding Fee VA will guaranty 25% of the final loan amount as long as it is in compliance with VA regulations * It is suggested that any deviations on loan amounts for purchases or construction and regular or cash-out refinances listed above be discussed with your secondary mortgage market representative prior to closing to ensure that you have the proper coverage needed to satisfy your investors requirements. Can a veteran purchase a home with their fiancé/fiancée using a VA loan? The veteran can purchase a home with any individual they choose, however; VA will only guarantee the portion of the loan attributed to the veteran and a spouse. For example, if the veteran intends to purchase a home with a fiancée prior to marriage and will share the same interest in the property, VA would guarantee half of the loan. What is the maximum guaranty on a joint loan for two veterans? The use of two certificates does not mean you can double the guaranty or loan amount. As with a non-joint loan, potential maximum guaranty on a joint loan is calculated based on the total loan amount and cannot exceed $104,250 even if the available entitlement of the veterans involved adds up to a greater amount. Is an off base housing authorization required for veterans currently serving in the Armed Forces to process a loan package? DD Form 1747 is no longer required. Will the VA accept a partial package for credit approval prior to the appraisal being ordered? No. The VA requires a complete loan package to underwrite a loan for commitment. A complete list of required package content is contained in Chapter 5.4 in the VA Lender's Handbook on pages 5-8 and 5-9. How many properties can a veteran own through VA? A veteran can reuse the VA benefit multiple times as long as there is sufficient entitlement to cover the new loan. In addition, the new home purchased must be the primary residence. Can a veteran refinance over the 90% LTV on a cash-out refinance? The loan amount may not exceed 90% of the appraised value (referred to as the base loan amount) plus the VA funding fee, plus the cost of any energy efficiency improvements up to $6,000. How do you process a loan for a veteran who has been rated incompetent? Obtain proof that the person signing the documents for the veteran is authorized. Obtain VA Form 26-8937, Verification of VA Benefits. Submit a complete package (including a NOV) to VA for underwriting prior to the closing. Where can I find information about lender approval, automatic authority or agents? All of this information is contained in Chapter One of the VA Lender's Handbook. The Handbook can be found online at http://www.warms.vba.va.gov/pam26_7.html. A checklist and specific points to consider when applying for automatic underwriting authority can also be found there. 22 If a veteran purchased a home with a VA home loan, paid off the loan and had entitlement restored, are they considered a multiple user? Yes, they are considered a multiple user and subject to a higher funding fee unless exempt or have a down payment of 5% or more. Additionally, if the benefit was used before and the borrower is using remaining entitlement to purchase another home, they would be subject to a higher funding fee. Information on funding fees can be found in the VA Lender's Handbook. What documentation is acceptable to establish exemption from the VA Funding Fee? VA Form 26-8937, Verification of VA Benefits, completed and signed by VA. Veterans who are rated eligible to receive compensation as a result of a pre-discharge disability examination and rating will now be considered as receiving compensation as of that date would need to provide documentation from the Veterans Service Center of a BDD rating. Can you give a mortgage for an Interest Rate Reduction Refinance Loan (IRRRL) when the veteran no longer occupies the property? Yes, prior occupancy of the property is sufficient. The IRRRL is the only VA loan where the veteran or his spouse does not have to occupy the property as a primary residence when the new loan closes. Specifics on occupancy requirements can be found in the VA Lender's Handbook. Is there any exception to the 10-year rule for Interest Rate Reduction Refinance Loans (IRRRLs)? The new term for an IRRRL may not exceed the term listed on the note of the original loan being paid in full by more than 10 years and not exceed 30 years plus 32 days. If the spouse is not on the mortgage can he/she be on title? VA is not concerned if the spouse is on title, but not on the mortgage. If the property is in a community property state, the lender must follow state regulations. Lenders should contact their legal counsel for further guidance. Can properties owned by the VA be financed using the veteran’s entitlement? Yes, VA repossessed properties can be purchased using the veteran’s entitlement. If the veteran is applying for a VA-guaranteed loan, VA will issue a Notice of Value (NOV) upon request at VA expense. Since January 2004, the management and sale of VA-owned properties has been contracted out to Ocwen Federal Savings Bank, West Palm Beach, FL. When the lender determines that the property is a VA REO (Real Estate Owned), they should contact Ocwen at 1-800-523-9479 or on-line at www.ocwen.com for further information. Should gift funds be verified in the donor's or applicant's account? There is no specific requirement in the VA Lender's Handbook. The lender must obtain a gift letter as a minimum. Many lenders obtain documentation of the veteran's receipt of funds from a donor. This ensures that the veteran did not obtain other financing to cover the closing costs. Can the veteran's retirement fund be included as liquid assets? Retirement funds that are not available to the veteran cannot be included as a liquid asset. Voluntary contributory retirement plans may demonstrate a veteran's ability to accumulate savings and should be considered a compensating factor. If a veteran is taking a loan against the retirement account to close the loan, the withdrawal must be recorded. What landlord experience requirements must be met for the VA to accept rental income for qualification? There are many types of rental properties that are specifically discussed in the VA Lender's Handbook. For example: If a veteran is purchasing a multi-family home to occupy as a primary residence, VA requires the lender to document veteran's reserves and previous landlord experience when the rental income is needed to qualify for the home loan. For landlord experience, veteran must have owned a multi-family home, had prior experience managing rental units or other background involving property maintenance/trades and rental or collections experience. If the veteran can support the mortgage without the rental income above requirements are not needed. Any landlord experience or equivalent must be properly documented in the file and unusual situations addressed in the remarks section of the loan analysis form, e.g., the veteran may initiate a contract with a property manager for a year in lieu of the landlord experience. This contract may be noted in the remarks section and could be accepted by the underwriter on a case-by-case basis in lieu of the standard regulation. What reserve requirements must be met for the VA to accept rental income for loan qualification? If a veteran is purchasing a multi-family home to occupy as a primary residence, the VA requires the lender to document the veteran's reserves and previous landlord experience when the rental income is needed by the veteran to qualify for the home loan. In this instance, 6 months of Principal, Interest, Taxes and Insurance (PITI) 23 reserves must be documented (above and beyond closing costs). If the veteran can support the mortgage without the rental income, neither the landlord experience nor reserve requirements are needed. If a veteran is not employed, may the income of the non-veteran spouse be used to qualify the veteran for the home loan? If the spouse is on the application, you can use the spouse's income. What length of time should the applicant be self-employed to consider it a source of income? The VA prefers the applicant to be self-employed for a two-year period. The underwriter may consider a candidate that has a full year of documented self-employment and past regular employment or education in the same line of work. Specifics concerning self-employment income can be found in the VA Lender's Handbook. Can the income from a non-qualifying spouse (a spouse not listed on the application) be used to qualify the veteran? If the spouse is not on the application you cannot use the income when completing the loan analysis form. However, should the spouse choose to provide documentation concerning his/her employment (e.g. pay stub and W2), the underwriter could consider removing the spouse from the residual requirement (reduce the number of family members by one). The spouse cannot be forced to provide this data. The underwriter must document the exception in the remarks section of the loan analysis form. Can we use income of a trailing spouse? Income from a trailing spouse can generally not be considered as the spouse does not have employment in the new location and there is no guarantee of employment when he/she moves. The income may be used to offset the expense of the spouse in his/her current location. Under certain circumstances, the lender may find it possible to document a demand in the new location for the spouse's profession and the underwriter may consider using the income for offsetting some obligations with the potential income. Use of this income in any form should be considered on a case-by-case basis and documented in the remarks section of the loan analysis sheet. Is it possible to consider the income of an applicant who has worked in a current job for less than one year, and the current job is not related to his/her previous job? In general, the VA would prefer that an applicant had worked on a current job for a year. Consideration may be given to the veteran if there has been a recent job change but is in the same line of work or has specialized training in the field. The underwriter should also consider the employer's evaluation on the probability of continued employment, how much of that applicant's income is needed and if are there any compensating factors. If the veteran does not have a full year on his/her current job (even if it is not related) the VA does not require an automatic denial. Specifics concerning income stability can be found in the VA Lender's Handbook. In all cases employment must be verified for a two-year period and any gaps of employment addressed by the applicant in a written format. 24 Can commission income be considered a source of income if the applicant has not been receiving it for two years? If applicant hasn’t received commission income for a two-year period, the underwriter must carefully review applicant's previous work experience and commission history. If applicant has been receiving commissions for at least one full year and has a background in the field, it may be possible to use that income or offset some debt. If veteran has not been receiving commission income for at least a year, it is unlikely this income can be used. What else can be considered to compute net income for a self-employed applicant? Depreciation claimed on the tax returns and financial statements can be added to net income to calculate qualifying income. Should the underwriter choose to include additional items in net effective income, these must be specified on the loan analysis form with documentation contained in the file. Can a veteran purchase a home that is more than 50 miles away from place of employment and commute? Yes, as long as the veteran can commute to his primary residence a VA loan can be used. If the veteran is going to be making an unusually long commute, the underwriter must consider commuting expenses in the loan analysis. Can Year to Date (YTD) Profit and Loss (P&L) statement earnings be used to derive income for selfemployed applicants? If so, must the P&L statement be audited or prepared by an accountant? The VA will average the earnings based on a YTD P&L statement if they are consistent with previous earnings. Generally VA does not require financial statements to be audited. Under some circumstances the underwriter may feel it is necessary to obtain an audited financial statement to clarify income or resolve discrepancies. Specifics concerning self-employment documentation can be found in the VA Lender's Handbook. Can part-time employment be considered as additional income for an applicant that also has a full-time job? The VA requires that overtime, part-time and bonus income is documented as consistent over a two-year period and is likely to continue. This is to show that the income is stable and the veteran is able to work beyond the normal work hours over a long period. If the income has been received consistently for 12 months and is likely to continue, the underwriter may choose to offset debt with this income. Income received for less than a 12-month period may be considered as a compensating factor by the underwriter. Specifics concerning overtime, second job or bonus income can be found in the VA Lender's Handbook. What are the requirements to consider disability compensation as a source of income? There is no time of receipt required to use disability income. The lender must document that the compensation is currently being received and that this income will continue for a three-year period generally, or be able to draw the conclusion that it will continue in the foreseeable future. In lieu of obtaining this documentation through the insurance company or Social Security Administration, it is possible to obtain a doctor's written confirmation regarding the applicant's probability of returning to work. If the disability will not continue for a three-year period/"foreseeable future," the underwriter may choose to consider the compensation to offset debt. The underwriter's decision should be documented in the remarks section of the loan analysis form. Specifics concerning disability income can be found in the VA Lender's Handbook. Can the income of a spouse who is not a US citizen be considered? If so, does the VA require documentation that the spouse has a green card? The income of a spouse who is not a US citizen may be considered if the spouse is on the loan application. The VA does not require any documentation that the spouse has a green card. Lenders should check with investors to verify secondary mortgage market requirements. What are the requirements for income to be considered if a veteran is employed by a "Temp" agency for more than 9 months with a well-established employer, can the income be used? Generally, it would be difficult to consider earnings from Temp agency employment without an established twoyear history. If a person is a career Temp agency employee, the overall earnings and employment history should be evaluated. Stability of income and a pattern of earnings may be established after a year. Any income used without a year history should be addressed in the remarks section of the loan analysis form. The underwriter must give careful consideration to these scenarios and address how stability and the average income are derived. How long does child support have to continue in order to be considered as income? Child support must continue for a three-year period or into the foreseeable future. If the support is going to be for less than three years, the underwriter may consider offsetting the children in the residual guideline if consistent receipt of the support is verified. If the underwriter chooses to offset the children in the residual guideline or offset an intermediate obligation, this should be noted in the remarks section of the loan analysis form. Specifics concerning child support income and the documentation required can be found in the VA Lender's Handbook. 25 Does the VA consider childcare costs a debt? If so, what documentation is required? Yes, the VA considers childcare expenses as debt. The lender must obtain a letter from the veteran documenting the childcare expense or detailing why no expense is incurred. Ensure that the current daycare provisions will remain logical based on the location of the new home. If applicable, the name and address of the childcare provider should be obtained. This expense should be listed under section D, line 30, job related expense on the VA Loan Analysis. Is it required to obligate the veteran for a mortgage that has been assigned to the ex-spouse by the courts? No, in general, you do not have to obligate the veteran for a debt that the courts assigned to an ex-spouse - even if that debt is delinquent, however; investor requirements may vary on this issue, therefore; it is always a good practice to verify this requirement with the investor. This is specified in the VA Lender's Handbook. For military applicants, do we need to consider separate household expenses if the applicant will be living in quarters and says he will not have any expense? If the veteran states that he/she will be living in military quarters at no cost and his/her spouse will be living in the subject property, you do not have to consider separate household expenses. However, if a review of the Leave and Earnings Statement shows a withdrawal for housing or there is any indication in the file of current expenses, clarification should be obtained. Can we disregard the veteran's monthly debt if it is to be paid off within the next 5 months? The underwriter must consider the following for installments with less than 10 months remaining: The payment must not be so large that it will have a severe impact on the financial situation of the household. The amount of "severe impact" is left to the underwriter's discretion. If the payment is large, the underwriter may consider if there are reserves to cover the debt after closing or a source of income they were unable to use in the analysis. The final determination is the underwriter's. If a debt is not considered and the logic is not highly visible, a notation should be made in the remarks section of the Loan Analysis. In the case of revolving or open-ended accounts with a continued pattern of use, the underwriter must include the regular monthly payment/minimum payment on the Loan Analysis. Specifics may be found in the VA Lender's Handbook. If a veteran co-signed a loan, must it be considered as their obligation? Not always, the debt may be disregarded if there is proof in the file that the payments are being made by someone else (e.g., a year's worth of canceled checks) and there is no reason to believe this will not continue. This is specified in the VA Lender's Handbook. How are student loans considered? Student loans must be reviewed on a case-by-case basis. The underwriter must consider the whole scenario and use judgment when making this decision. Factors to be considered include whether the payment is deferred or if there will be new or additional income to offset this expense. Federal regulations require lenders to postpone the student loan program payments of active duty military personnel. Military personnel who have been deployed or mobilized are not required to make student loan payments during their absences. This applies to members of the National Guard and Ready Reserves who have been called to active duty, as well as to active duty personnel whose duty station has been changed as a result of a military mobilization. The regulations apply to student loans made under the Federal Family Education Loan, William D. Ford Federal Direct Loan and Federal Perkins Loan program. Loans deferred for more than a year may generally be disregarded. Should the underwriter choose to exclude a student loan as an obligation, a notation should be made in the remarks section of the Loan Analysis. How are 401K loans considered? 401K loans may be disregarded. Are union dues, life insurance or medical insurance included in the debt section of the Loan Analysis? No, all of these factors are considered part of the residual requirement. The residual is the net income after shelter, debts and taxes is removed. The debt section covers items the veteran and family needs such as food, clothing, healthcare, gas, etc. Additional information concerning residual income may be found in the VA Lender's Handbook. 26 How is child support considered from a debt and credit report standpoint? Child support is considered as a debt and must be listed in section D of the Loan Analysis. If late payments appear on the credit report, it should be addressed and considered in the overall credit picture. Do unpaid obligations, such as collections and charge-offs, listed on a credit report have to be paid off? What about judgments or liens? The VA does not require charge-offs and collection accounts to be paid off, however; the investor may require them to be paid. The underwriter should obtain the veteran's explanation and supporting documentation if needed. If the accounts are dealt with by a steady repayment plan, this may be considered as a positive factor. If there has not been repayment scheduled, paying them off now does not alter the unsatisfactory credit. Judgments, Federal debts and liens must be paid in full or have a written repayment agreement. Written repayment agreements must be included in the debt section of the loan analysis. This is specified in the VA Lender's Handbook. What procedures should I follow if I get a CAIVRS "hit"? The following steps should be taken: Contact the veteran or co-applicant regarding the claim to find out if they know about it, or have proof that it has been paid in full/resolved. If the applicant is not aware of the item or needs to resolve it, someone must contact the federal agency listing the debt. A listing of agencies and contact phone numbers are contained in the VA Lender's Handbook. If it is determined that there is no claim against the veteran, the lender should document this by written confirmation from the agency or the lender telephone certification. The Housing and Urban Development's (HUD's) CAIVRS system may not be updated quickly so do not hold up the approval or closing. If there is a loss to the government, the lender must obtain proof of payoff or a written repayment agreement. When can a person with a bankruptcy on the credit report apply for a VA loan? The date of the discharge is the major determining factor. If a bankruptcy was discharged more than 2 years ago it may be disregarded. If the bankruptcy was discharged between 1-2 years ago, the veteran must have reestablished credit by some means and the cause of the bankruptcy must be documented as having been beyond the control of the applicant (e.g., job loss or medical issues). If the bankruptcy was discharged less than a year ago, it will not generally be possible to ascertain satisfactory credit risk. Marginal cases should be addressed in the remarks section of the Loan Analysis. The guidelines for bankruptcy can be found in the VA Lender's Handbook. How do you treat Consumer Credit Counseling Services (CCCS)? If an applicant is currently in consumer credit counseling, they must have demonstrated a 12-month history of timely payments and the counseling agency must approve of the new credit. Occasionally an applicant chooses to participate in consumer credit counseling to obtain assistance with finances, even without being behind in payments. In these cases, consumer credit counseling may be considered a neutral or even a positive factor. Do not treat this as a negative credit item if the veteran entered the consumer credit counseling plan before reaching the point of having bad credit. Specifics on consumer credit counseling may be found in the VA Lender's Handbook. The veteran has been living with his/her parents and does not have any loans or credit cards. What does the veteran need to provide to be considered credit worthy? The underwriter must look at these cases individually and consider if there were any past credit or other compensating factors. The VA does not consider the lack of credit a negative factor. The underwriter may also consider non-traditional sources of credit such as pagers, cell phones, or car insurance. 27 Is a veteran eligible for a loan if he/she is behind on child support payments? Child support is a credit obligation and if it is in arrears, it must be addressed. The veteran may have a legal action pending. In those cases underwriter must look at documentation and explanation submitted. If documentation supports a veteran's claim that they are not responsible for debt and merely awaiting the court records to be finalized, this would not be considered a derogatory item. All other cases with pending legal action must be looked at on a case-by-case basis. Should you need advice on these, make sure you develop the situation completely then speak with your supervisor or VA Regional Loan Center for guidance. If the veteran is behind due to financial matters, the underwriter must take the following into account: Is there is a repayment schedule? How it will be repaid? Will the cause of the delinquency have an impact on the veteran's proposed loan scenario? The underwriter must exercise good judgment on a case-by-case basis. To determine whether the veteran has a satisfactory payment history, how many months must be reviewed? Generally VA requires a 12-month history of satisfactory payment. Any late payments within the past year should be developed for an explanation and supporting documentation obtained if needed. The underwriter must make a credit decision based on all the documentation of that particular veteran. Comments should be placed in the remarks section of the Loan Analysis for any loans approved that have late payments in the past year. In marginal cases it may be helpful to review the mortgage or rental history carefully as the applicant's past repayment history could establish how motivated the applicant is to make timely mortgage payments in the future. Information on adverse credit or other scenarios such as bankruptcy and foreclosures may be found in the VA Lender's Handbook. Does VA use credit scoring? If so is there a minimum? No, the VA does not use credit scoring. The underwriter should review the credit of each veteran individually. The VA does recognize that credit scoring is a standard mortgage industry practice and a high credit score may be listed as one of several compensating factors in the remarks section of the Loan Analysis. Should the underwriter be using an automated underwriting system such as Loan Prospector, they would follow specific guidelines in accordance to the automated underwriting system. Can payment plans be used on derogatory credit? If so how long do they have to have been established? If there are derogatory credit issues (e.g., a collection account, IRS lien, back due child support), but the veteran has been making payments for a full year, the underwriter may consider this a positive factor. Be sure to list the payment as an obligation. If the borrower has been making payments for less than a year, the underwriter must review all factors for the loan to determine if the overall credit is acceptable. The underwriter must use judgment on a case-by-case basis. These decisions should be documented in the remarks section of the Loan Analysis. If a veteran's spouse is not on the application and is receiving child support payments, could these funds be considered to offset the children in the residual? Yes, as long as the motivation for payment (e.g., court order) and consistent receipt of the funds are documented. Are compensating factors considered for loans with ratios over 41%? The VA home loan is a residual driven program. The VA considers the ratio as a secondary evaluator. The underwriter should consider the following: If the residual is in excess of the guideline by more than 20%, a loan with a high ratio but good credit and job stability could be approved. If the loan does not have residual + 20%, the underwriter must review all compensating factors and the decision should be documented in the remarks section of the Loan Analysis. For loans with ratios over 41% and the residual does not exceed the guideline by 20%, the underwriter's supervisor must sign the Loan Analysis concurring with the underwriter's determination. The reasoning for loan approval must be listed in the remarks section of the Loan Analysis. Specifics on ratios, second signatures and compensating factors are found in the VA Lender's Handbook. Can non-taxable income be grossed up? Non-taxable income can be grossed up for determining the ratio only. Item 39 of the Loan Analysis form must list the actual income, not the grossed up figure. Grossing up 15 – 20 percent would be considered acceptable. 28 Regional Loan Centers Contact Regional Loan Center Atlanta Jurisdiction Georgia, North Carolina, South Carolina, Tennessee Delaware, Indiana, Michigan, New Jersey, Ohio, Pennsylvania Alaska, Colorado, Idaho, Montana, Oregon, Utah, Washington, Wyoming Telephone 1-888-768-2132 Cleveland 1-800-729-5772 Denver 1-888-349-7541 Honolulu Hawaii 1-808-433-0481 Houston Arkansas, Louisiana, Oklahoma, Texas Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, Vermont 1-888-232-2571 Manchester 1-800-827-6311 Phoenix Arizona, California, Nevada, New Mexico Kentucky, Maryland, Virginia, Washington, DC, West Virginia Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, Wisconsin Alabama, Florida, Mississippi, Puerto Rico, US Virgin Islands Nationwide Eligibility ONLY 29 1-888-869-0194 Roanoke 1-800-933-5499 St. Paul 1-800-827-0611 St. Petersburg 1-888-611-5916 Winston-Salem 1-888-244-6711 Available Continuing Education Unit (CEU) Credits We know how important continuing education is to the realtor community. We have successfully secured CEU credits for the following courses in the following states. Please contact the appropriate field office for more information. Course Title State(s) VA Home Loans for Real Georgia Estate Professionals Atlanta VA Home Loans for Real Tennessee, North Carolina, and South Estate Professionals Carolina Cleveland VA Home Loans Ohio Cleveland VA Home Loans Michigan Denver Working With The Veteran Alaska, Colorado, Idaho, Montana, Homebuyer Oregon, Utah, Washington, Wyoming Honolulu VA Home Loan Program Guam Phoenix VA Home Loans for Real Arizona, California, and Nevada Estate Professionals St. Paul TBA* Minnesota St. Petersburg Real Estate Professionals Alabama and Florida Selling to Veterans St. Petersburg VA Loan Information for Real Mississippi and Puerto Rico Estate Professionals * This course is still in development, but it should be available by the end of November. Field Office Atlanta Credits 3 4 3 6 4 3 3 3 3 3 30 WEB SITE DIRECTORY Address www.homeloans.va.gov What’s There? Lender’s Handbook, VA forms, FAQs, information pamphlets, Regional Office directory Veterans Information Portal Includes TAS, WebLGY & condo and builder listings. VA Forms Links to live broadcasts, Webbased training and “on demand” streaming internet video training National Personnel Records Center (Obtain military records.) National Association of State Directors of Veterans Affairs Funding Fee Payment System Military pay charts, housing, installations, etc. Nationwide VA acquired property listings, bidding instructions, etc. Mortgage calculators, find a lender, closing costs explained, etc. (Independent information service, not affiliated with any lending institution.) https://vip.vba.va.gov www.va.gov/vaforms www.homeloans.va.gov/broadcast.htm http://vetrecs.archives.gov www.nasdva.com https://va.pay.gov www.military.com www.ocwen.com www.mortgage-x.com 31